Sunday, November 22, 2015

Spectrum Brands Holdings Q4 2015 Earnings

Spectrum Brands Holdings (SPB) reported its Q4 2015 earnings on Thursday, November 22, 2015. The company reported Q4 EPS of $1.13, $0.04 worse than the analyst estimate of $1.17. Revenue for the quarter came in at $1.31 billion versus the consensus estimate of $1.33 billion. Although the company missed on both top and bottom line, the stock reacted positively to strong updated company guidance for FY 2016. Before the company released earnings the stock was priced at $92.45 per share but then rose approximately 4% to $96.18 post earnings. Spectrum Brands expects fiscal 2016 net sales, as reported, to increase in the high-single digit range compared to fiscal 2015 reported net sales of $4.69 billion. Fiscal 2016 free cash flow is projected to be approximately $505-$515 million compared to $454 million in fiscal 2015. Capital expenditures, which were $89.1 million in fiscal 2015, are expected to be in the rage of $110 million to $120 million. I believe the company’s strong updated guidance including expected growth in sales and increase in capital expenditures will provide expansion, and support of technology innovation for the company which could definitely create an increase in value of the stock in the future. 

Saturday, November 14, 2015

ORCL 11/15

ORCL began trading the month of November at $39.05, and then reached a three month high on November 6th trading at $40.64. ORCL closed on November the 13th trading at $37.30 representing a 4.5% decrease for the month of November thus far. Additionally, this represents an 11.7% decline off of our purchase price of $42.25. This is close to where ORCL’s stock price has remained for much of the current quarter. ORCL’s cloud component continues to grow rapidly, however that growth does not appear to be well represented in the stock price. ORCL plans to hire more than 50 engineers in the next 6 months to build up its growing portfolio of Data-as-a-Service offerings. In early November ORCL launched a new cloud data product that can identify age and gender targeting with twice the precision of methods currently available on the market. On November 5th FBR & Co’s Daniel H. Ives downgraded the rating on the company from Outperform to Market Perform, while maintaining the price target at $44. The downgrade was due primarily to ORCL lack of ability to cope with foreign currency headwinds over recent quarters in addition to the lack of M&A expected to maintain ORCL’s new cloud business. However, late last month ORCL executive Larry Ellison alluded to the idea that they were saving cash for a large acquisition in the future. Additionally, ORCL was downgraded at Morgan Stanley which maintains a $45 price target.  

Jeff Sherman

Thursday, November 5, 2015

KORS Q2 Earnings Blog

Michael Kors reported second quarter revenue and earnings that both topped the Street’s expectations. Revenue came in at $1.13B, which beat estimates by $50M and represented a 7% increase year-over-year. Revenues were driven by strength in the company’s retail and wholesale segments across all geographies. Retail sales were up 8% due to 39 new store openings, strength in North American digital flagships and continued momentum internationally. Japan led the way, with sales increasing 61% on a constant currency basis. Comps were down 8.5% for the quarter, which was in line with expectations. The comparable store sales decline in North America was slightly offset by comp increases in Europe and Japan. If the U.S. digital flagship stores were included in the calculation, comps would have only been down low-single-digits in the quarter. Wholesale sales for the quarter grew 8% mainly attributed to continued strength in the accessories category. During the quarter 223 globally located wholesale stores were converted into shop-in-shops. The company continues to expand its wholesale business across all geographies. Licensing revenue was down 8% in the quarter primarily due to lower watch sales, somewhat offset by increased sales of jewelry, outerwear and eyewear. Gross margins were down 220 bps primarily due to the foreign currency impact on sales. SG&A was up 250 bps as a result global retail expansion, digital flagship initiatives, infrastructure investment for Korea in the men’s business, the building of a new European distribution center and continued investment in corporate systems. On the bottom line, earnings were reported at $1.01, which was $0.12 higher than expectations. This beat included a $0.06 negative impact from foreign currency exchange rates. Turning to the balance sheet, cash and equivalents decreased 57% from the same quarter last year due to the company’s ongoing share repurchase program. KORS purchased 9.4 million shares, totaling $400 million, during the quarter. To date the company has repurchased 23.2 million shares for approximately $1.2B. Inventory was up 15% YoY attributed to increased European inventory, acceleration of holiday merchandise and the consolidation of MK Panama. The remainder is due to normal growth as the company continues to expand its store base and e-commerce capabilities.

Wednesday, November 4, 2015

CIT Group 3rd Quarter Earnings Report

CIT Group reported Quarter three earnings pre market open on November 3rd. CIT Group posted EPS at $.80 and revenues of 520.9M. CIT Group beat estimates by $.09 and $.54M, yet the street reacted negatively to the beat, dropping CIT Group 2.5% on November 3rd. In the Transportation and North American banking business, CIT Grew to just over a billion dollars excluding the recent acquired assets. In transportation the commercial aircraft utilization rose slightly to 98%, and railcars declined to 97% which is because of the weaknesses in the commodity markets. CIT Group is continuing to participate in a share buyback program, and they provided investors a total of $170 million dollars.

Acquiring OneWest Bank increased CIT’s assets by almost 22 billion, which included 6 billion in cash, 8 billion in loans, and 6 billion in a run off mortgage portfolio. Net financing margin increased by 30 basis points to 3.7%, mostly because of a lower funding cost now. CIT’s transition to a commercial bank looks like it paying off, and with the possible increase in interest rates, CIT Group would only become more profitable, especially with the new acquisition. 

Monday, October 26, 2015

CIT Group 3rd Quarter Report

CIT Group dropped 13.9% since July 1st. CIT Group ended the quarter trading at 39.61 which was right above the stop loss. This is mainly attributable to the stock market sell off in late August and the continued downward trend of the financial sector in mid-September. CIT Group was heavily depending on an interest rate hike due to them growing the commercial banking side of their business. The big news for CIT is that they acquired OneWest Bank in the third quarter in early August and the acquisition was complete on August 8th. CIT Group won lead lefts for middle market capital raising plans. CIT Group also formed a joint venture for commercial lending with TPG Capital. This was done to grow the commercial lending franchise of CIT.

Even though the steep drop of CIT Group this quarter I still find it a very strong company. They are releasing earnings on November Third pre-market open. CIT Group is looking to sell off CIT China and CIT Canada and also sell or look into other options for the 10 billion dollar airline financing wing. Once earnings are released and more solid details are released about the company the investment thesis needs to be revisited and the model to be updated to see if the company still fits the investment horizon. 

Thursday, October 22, 2015

CIT Group Rises 15.7% Today as Thain Announces Retirement

CIT Group is up 15.7% today to $46.14 as big news comes out announcing John Thain's retirement. This announcement surprised Wall Street after his short 5 year term at the lending company. Over the past five years, Thain recovered the company from Bankruptcy after 2008, cut costs, and improved returns. He also oversaw the recent $3.4B acquisition of the California bank OneWest. Thain will remain the chairman of CIT. Ellen Alemany will now lead the bank beginning in March and will be one of the few women leading a large bank. CIT also announced that they have taken a few steps to transition to a commercial bank model. They are planning on selling CIT Canada and CIT China. CIT Group is also exploring "strategic alternatives" for its $10B commercial aircraft business. The recommendation is still a BUY with a price target of $54.75. I will be revisiting the investment thesis to update it. I still view CIT Group as a sound company that has been cutting costs while transitioning to more profitable ventures. CIT Group is releasing earnings on November 3rd.

Saturday, October 17, 2015

U.S. Ecology Earnings Preview (11/4)

U.S. Ecology closed this week at $46.39.  This price represents a 4% decrease over the last month, a 2.9% increase QTD, and a 15.6% increase YTD.  We entered this position at a price of $44.13 nearly one year ago, a 5% gain ITD.  ECOL is scheduled to report earnings on November 4th, the latest such date in our sector.  To recap the previous earnings release, UNP surprised the markets by posting revenue that more than doubled its previous quarter; the same held for operating income.  However, EPS only arrived at a disappointing $0.10, due entirely to a one-time good-will impairment. 

There is no reason U.S Ecology shouldn’t repeat this performance.  It is currently in the midst of numerous long-term contracts, and its backlog is strong and growing.  Its environmental service divisions are slated by management to have an unprecedented year.  In fact, management expects that, even despite the downward adjustment of Q2 EPS, ECOL will finish 2015 at the upper-end of its previously forecasted $1.76-1.92 EPS range.  Wall Street shares this opinion, predicting a consensus EPS of $0.66 this quarter.  Based on the contributions of six analysts, it has assigned an “overweight” rating to the equity—this matches the ratings from three months ago.  U.S. Ecology will pay its $0.18 dividend, as announced, on 10/19. 

U.S. Ecology still expresses confidence in the immediate benefits of its August divestiture of All-State Power Vac, completed in the hopes of streamlining operations.  In addition, just this past month, ECOL has been in the middle of a battle with Detroit taxpayers.  It had begun to expand operations at one of its waste treatment plants in the city, one that specializes in the detoxification of naturally-occurring radiation from fracking.  This plant even gained necessary state approval to begin treating greater quantities of waste from neighboring states.  However, in response to due diligence from a few journalists and the public, this will be halted.  This was a major project, but bearing in mind the history of safety at this plant, management expects the expansion to resume in the near future.  There has been little else in the way of company news.